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    Brent: Oil prices can renew the plunge on 01.02.2016

    Amid the decision of the Bank of Japan to introduce negative interest rates on deposits, the global stock indices have grown by the end of the closing of the session on Friday. Japanese indices of Nikkei Stock Average have grown by 2.8% by the end of the trading day. Major Chinese stock indices rose over 3.0% at the Friday’s Asian session.

    The price of crude oil Brent was below the level of 36.00 USD per barrel at the closing session last Friday. However, today’s trading day at the Asian session was unfavourable for Chinese stock market. Shenzhen Composite fell by 1%, ChiNext – by 0.1%, Shanghai Composite Index – by 1.8%. So, poor data on Chinese industrial sector has triggered the decline in Chinese stock indices. Oil prices are also declining. In April, futures of Brent crude oil at ICE Futures in London fell by 0.74 USD, up to 35.25 USD per barrel. The spot price has reached the level of 35.00.

    Significant decline in the price of oil resulted in losses of the oil companies. According to Wall Street Journal and Tortoise Capital Advisors, about 17 oil companies reported the decrease in the capital budget by 30% in 2016 versus the year of 2015.

    The main factors, which caused the decline in the oil market are the following: slowdown of the Chinese economy, significant excess of oil supply over the demand in the world market, the increase of oil production and exports of the major oil producing countries because of the introduction of Iranian oil in the market.

    Presently, oil exports from Iran amount to 1.1 million barrels per day. Iran has already announced that it is not going to consider the possibility of reduction in oil production until the exports exceeds 1.5 barrels per day.

    Today’s poor data on the Chinese industrial sector has reminded about slowdown of the Chinese economy once again, while China is one of the largest consumers of crude oil. As it was announced last month, Chinese GDP increased by 6.9% in 2015, showing the slowest growth rate over 25 years.

    The information released last week that, Russia and Saudi Arabia would consider probability of oil production reduction had supported oil prices, which went up to 36.00. However, later, OPEC denied this information.

    It is possible that the level of 36.00 USD per the barrel of crude oil Brent is the highs of the correction movement, accounting for 25% growth versus the recent low of 27.00. At the same time, fundamental data shows that the downward plunge of oil price can continue.


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